What's at Stake this week?

March 26, 2023

Happy Sunday and Ramadan Kareem! We thought of switching things up this week… We’ll kick off with a quick take from our Stake experts to keep in mind the next time you want to be the smartest person in the room 👀 And while you’re at it, have a look at some other takeaways from this week 👇

📝Stake Shorts

Diversification is key

A good investor understands that generating sustainable returns requires a long-term investing approach that can only be achieved with a well-diversified portfolio. What it all boils down to is recognizing that risk is inevitable and is an inherent part of the investment process. Certainly, not all investments will meet or surpass expectations, which is where the fundamental principle of diversification becomes essential.

Recent events, such as the fall of Silicon Valley Bank and Credit Suisse, have brought into focus the fragility of the banking sector and also markets more broadly. It is a timely reminder that what we think is safe and stable, may not always be the case. Those exposed to the markets affected got spooked and those with money in SVB and CS got the scare of their life – and there lies the importance of diversification. As market uncertainties continue to loom, it is important to remember a few core principles:

  • Invest wisely: If you have the capital, this is the perfect time to put your money to work. But remember, a sound investment strategy is built on a diversified portfolio tailored to your specific needs and risk appetite. Explore different asset classes, especially if they are uncorrelated, and remember that stable cash flows through dividend yields can be key during times of volatility.
  • Do your research: It’s crucial to explore more than one investment option, understand the benefits and drawbacks of each, how they behave relative to each other, and how they contribute to your personal wealth goals. Real estate exposure is considered essential for every investor, and now fractional investing has granted everybody access to it, whether you want to invest $100, $1K, or $1M!

💭 Fractional real estate investments are far more resilient in the face of broader market impacts and economic uncertainty, versus traditional REITs, which are highly correlated to the stock market and can significantly underperform during a downturn. If you want exposure to real estate, think twice about how you get it!

  • Diversify, diversify, diversify: It may seem like a daunting task without any explicit instruction, and may feel like this term has been thrown at you over and over again without much explanation, but it really is simple. The goal is to acquire various uncorrelated assets so that the performance of one doesn’t significantly influence the entire portfolio or another asset. By allocating your total investable funds across major asset classes, such as stocks, bonds, commodities, and real estate, you achieve diversification! Learn more here.

The bottom line? By conducting thorough research and leveraging the many benefits that fractional investment structures have to offer, you can optimize your financial strategy and minimize your exposure to risks associated with market volatility.

📂ICYMI: The latest from Dubai

Spending up 19% in 2022 across the UAE

Majid Al Futtaim, a leading Emirati holding company based in Dubai that operates shopping malls, retail, and leisure establishments in the Middle East and North Africa has recently published data on the state of the UAE retail economy during the last quarter of 2022.

According to the report, a 19% YoY increase in consumer spending was recorded last year, driven by government initiatives, higher oil prices, and a resurgence in the tourism and property sectors. Retail spending rose by 13% across areas like leisure and entertainment (up 29%), fashion (up 25%), and general retail (up 9%). Meanwhile, non-retail spending primarily in sectors like government services, travel, petrol and gas, and education grew by 29%. Other major contributions to this growth included Expo 2020 Dubai, the Fifa World Cup games in Qatar, and ongoing shopping events like the Dubai Summer Surprises.

💡Some key figures include…

  • The UAE GDP grew by 7.9%, the highest since 2006, compared to 3.9% in 2021
  • The oil economy expanded by 11.4%, while the non-oil economy grew by 6.6%
  • The UAE government’s revenue reached AED 143.1Bn in Q4
  • Property transactions soared 60% YoY, with sales values up 76% to AED 265Bn
  • E-commerce sales more than doubled to AED 22Bn

The rapidly growing number of people moving to Dubai is expected to further boost consumer spending, especially as concerns around inflation recede and actual inflation falls, encouraging a more optimistic view of the UAE economy’s performance in 2023. In the UAE, concerns about inflation have been decreasing, with only 28% of consumers expressing significant concern in Q4, a notable drop from 39% in Q3, according to the Majid Al Futtaim Happiness Lab surveys. Although the country experienced an inflation rate of 5.2% in 2022, its highest in years, it remained substantially lower than the 13.4% rate recorded across the Middle East, as per the IMF.

The bottom line? Dubai continues to be perceived as a safe haven for high-net-worth investors and entrepreneurs, which has contributed significantly thus far to the uplift realized in the real estate market. Over 27K transactions were registered during the last quarter, up from 16K the previous year and sales values skyrocketed to almost AED 10Bn during the final week of December alone. As Savills forecasts a 22% increase in high-net-worth households in the UAE over the coming 5 years, these numbers are poised for even greater growth.

Leave a Reply

%d bloggers like this: